Banks’ YTD poor returns unsettle operators

Stockbrokers blame unfriendly policies, uptick in fixed market yield

WITH the 33 per cent YearTo- Date rise in the AllShare index, operators ha ve bemoaned the negative 12 per cent return on in vestment recorded by the banking sector, ranking it as the worst performing on the nation's bourse presently. According to the operators, the banking sector , which achieved an impressive fullyear 2023 growth of 114.9 per cent, r eflecting investor confidence and increased appetite for banks’ stocks, has emerged as the worstperforming at the close of transactions last week.

The ban king equities’ poor return may not be unconnected to the market’s unfrie ndly requirements for the banking recapitalisation exercise rolled out by the Central Bank of Nigeria, restraining banks from pay - ing out huge dividends commensurate with their earnings, which several investors were targeting when they rushed to the sector.

This, is in addition to the earlier directive that banks should not utilise the foreign exchange ( FX) revaluation gains realised from the 60 per cent devaluation of the naira to pay dividends or for other operational expenses. While other segments already outperformed or are closer to achieving the 33 per cent index figure, the banking index underperformed the index with - 12.07 per cent.

This is despite the significant improvement recorded by the tier- 1 banks as most of them reported above N1 trillion in market capitalisation, coupled with huge foreign exchange gains made from asset revaluation.

Data obtained from the Nigerian Exchange Limited ( NGX) showed that the NGX industrial goods index has recorded YTD return of 72.8 per cent gain to investors while the consumer index rose by 41.7 per cent. The oil and gas index and insurance index improved by 23.8 per cent and 18.6 per cent. The NGX index has also recorded a 33.1 per cent gain as at the close of trading last week.

The banking sector had been the toast of investors over the years, even in an increasingly uncertain macroeconomic environment.

For instance, the banking index recorded a leap in 2023, with an increase of 114.9 per cent or 479.7 basis points, closing the trading year at 897.20 index points, higher than 417.50 at which it opened for transactions in January 2023.

President and Chair of the Board of Directors, US Export- Import ( EXIM) Bank, Reta Jo Lewis ( left) and Managing Director/ CEO, Bank of Industry, Dr. Olasupo Olusi, after the MOU signing to commence collaboration and partnership between the two organizations on the sidelines of the World Bank/ IMF Spring Meeting in Washington D. C, United States.